AZBio Writes to Congress regarding changes to Medicare Part B

Letter sent to members of our Arizona Congressional Delegation:

In one way or another cancer will touch each of us during our lifetime.  According to the 2011 report by the American Cancer Society, approximately 31,550 Arizonans will be diagnosed with cancer this year alone.  Here in our home state, thousands of Arizonans battle cancer while many more work tirelessly to help
them through state of the art cancer centers including the Mayo Clinic, the Arizona Cancer Center, Cancer Centers of America and our network of some of the finest hospitals in the country.

In keeping with the Arizona BioIndustry Association’s commitment to monitor key issues and to share key information on areas that affect our community, our state and our nation, the following points are offered to assist you on how best to control healthcare costs while serving the best interests of millions of  mericans and tens of thousands of Arizonans who are touched directly or indirectly by cancer and other serious diseases each year.  We urge you to work with your colleague, Rep. Lance Leonard (R-New Jersey), who
highlighted these points in a letter to Speaker Boehner and Leader Cantor in a July 21, 2011 letter.

  •  Medicare Part B coverage of drugs provides an invaluable route of access for cancer patients and other patients facing grievous illnesses. Part B provides an important pathway for patients to access a narrowly defined, limited number of provider-administered products (e.g., those that are injected or infused under the direction of a physician). Furthermore, the patients served under Part B are often those in greatest need. Disrupting how the care of these patients is delivered and paid for would do a great disservice to the sickest patients fighting devastating diseases.
  • Part B drugs require physician supervision to deliver. Unlike pills that patients can
    take themselves at home, Part B drugs paid as part of a physician or hospital visit require a physician to supervise administration.   For this reason, Congress authorized the Centers for Medicare and Medicaid Services (CMS) to cover these special products under Part B. Unlike products that patients pick up in retail pharmacies, these products are purchased by physicians from manufacturers or their distributors. Physicians then bill these products to Medicare along with the other services that they provide to patients during their office visits.
  • Providing Part B drugs to patients requires physicians to follow complex procedures. Many Part B products are injected or infused directly into the patient’s bloodstream; involve treatment regimens that call for ongoing clinical monitoring and patient education; require detailed clinical knowledge to determine appropriate dosing, to mix, and to deliver in sterile conditions; and
    have special handling and complex storage requirements mandated by the U.S. Food and Drug Administration (FDA) as part of their product labeling.
  • The cost containments activities relative to these drugs were already addressed when the Medicare Modernization Act (MMA) was enacted.  A few years ago, Congress revised the payment rates for Part B drugs as part of the MMA and introduced a new system called Average
    Sales Price. Part B drug reimbursement was reformed and payment amounts were dramatically reduced as part of the MMA. Payments are now set using market-based Average Sales Price (ASP) data, which reflect the actual prices paid by physicians and other drug purchasers. ASP is a market
    driven reimbursement mechanism that works well and has driven down Medicare costs. The goal of ASP was to bring Medicare payments for Part B drugs in line with the average costs to providers. This reform has worked, as the Medicare Payment Advisory Commission (MedPAC) noted, “As intended by the policy, payment rates for drugs were reduced to levels closer to provider purchase prices and payment rates for drug administration increased.”
  • Congress set the reimbursement rate for most Part B drugs at ASP+6%. The +6% was added to the average sales price for several important reasons, such as the following:
    • A product’s acquisition cost is just one aspect of the overall costs incurred by a physician. Other costs that physicians must bear commonly involve (1) shipping fees, (2) the costs of supplies used in handling and preparing the products for administration, (3) overhead costs for storing the products, (4) staff time to negotiate prices for and order the products, (5) staff time for clinical monitoring and education of patients; and (6) state taxes on the drugs.
    • Acquisition costs vary. Physicians in large practices or who commonly use Part B drugs may get discounts on drug prices based on purchasing volumes. Smaller physician offices especially those in rural areas are less likely to have significant purchasing volumes and, therefore, the prices that they pay would reflect that fact.
    • ASP is – by definition – an “averaging” system. As is the case in any system built on averages, there will be some providers whose costs will be higher than the average. As noted above, it is also often the case that these providers are in small practices with low patient volumes and /
      or those in rural localities. The additional reimbursement of 6% above ASP reduces the likelihood that these providers will face reimbursement below their acquisition costs. Without the 6% above ASP many of these small rural providers could be put at risk causing serious disruptions for extremely ill Medicare beneficiaries.
    • MedPAC notes that, for most physicians the difference between
      ASP+6% and their costs for drugs is “slim.” MedPAC also reports that “there are
      some drugs they cannot purchase at the payment rate,” meaning that the Medicare
      reimbursement rate is less than their acquisition cost.
    • A recent study in the Journal of Clinical Oncology found that
      “many practices pay prices above ASP+6% reimbursement for key products” and
      concluded that the “economic strain combined with inadequate reimbursement limits
      patient access to care when practices are forced to turn away patients or go
      out of business.”
    • As part of the legislative negotiations on ASP, MedPAC cautioned
      Congress that physicians need an additional percentage above ASP and
      specifically said that the percentage “should be set high enough to cover the
      costs of an efficient provider.”

As I shared in the beginning, thousands of Arizonans and millions of Americans will be touched by cancer and other diseases where lifesaving physician administered treatments fall under Medicare Part B.  Further cuts to Part B and ASP (a market driven system that works well) could well  jeopardize access for cancer patients and other patients facing grievous illnesses, especially since MedPAC and others have found that physicians already have problems obtaining some products at or below the current ASP+6% rate.  If we cut
this program more severely than we already have, those Arizonans and Americans along with their friends and loved ones pay the ultimate price.

On behalf of the Arizona BioIndustry and our community, I thank you for taking the time to read this letter and for doing what is best for all of us.


 Joan Koerber-Walker
President and CEO
AZBio, The Arizona Bioindustry Association
1475 N. Scottsdale Road
Phoenix, AZ 85257